Bitcoin Falters as Market Nerves Jangle, Fed Uncertainty Looms

Bitcoin's price drifted lower on Thursday amidst lingering uncertainty over U.S. interest rates. The largest cryptocurrency traded at $65,525.6, down 0.9% over 24 hours, as risk appetite remained fragile. Mixed cues from the Federal Reserve's Chair Jerome Powell and anticipation of nonfarm payrolls data kept traders cautious. Despite dollar weakness, Bitcoin remained rangebound, while other major cryptos experienced muted moves. Fund flows continued to favor Bitcoin, but ETF activity has slowed, suggesting a cooling of the recent rally sparked by the approval of spot Bitcoin ETFs.

Bitcoin Wobbles Amid Market Jitters, Fed Uncertainty Casts Shadow

Bitcoin, the world's leading cryptocurrency, experienced a modest decline on Thursday as risk appetite remained subdued amidst persistent uncertainty over the trajectory of U.S. interest rates. Adding to the bearish sentiment, signs of waning capital inflows further weighed on the market.

As of 01:49 ET (05:49 GMT), Bitcoin had shed 0.9% in the preceding 24 hours, trading at $65,525.6. This level remains significantly below the all-time highs witnessed in March.

The recent rangebound nature of Bitcoin's price action stems from mixed signals emanating from the U.S. Federal Reserve regarding potential interest rate hikes. Traders have been reluctant to make substantial bets, awaiting further clarity. The looming release of crucial U.S. nonfarm payrolls data later this week has also served as a deterrent to large-scale trades.

Bitcoin found little solace in the weakness of the U.S. dollar, which retreated from recent five-month highs following lukewarm comments by Federal Reserve Chair Jerome Powell on interest rates. While Powell reiterated the bank's commitment to raising rates over the course of 2024, he provided scant guidance on the timing and magnitude of such increases.

Powell's emphasis on the need for greater confidence in inflation's return towards the targeted 2% annual pace further dampened bullish sentiment. Additional speeches by other members of the Fed's rate-setting committee scheduled for later this week will be closely monitored for potential insights.

Beyond Bitcoin, other major cryptocurrencies exhibited muted movements. Ripple (XRP) declined 2.4% to a one-month low, weighed down by anticipation surrounding further developments in the ongoing legal battle between Ripple Labs and the U.S. Securities and Exchange Commission.

Ethereum (ETH), the second largest cryptocurrency by market capitalization, gained a modest 0.3% to $3,301.48. This comes ahead of an anticipated decision by the SEC in May regarding spot exchange-traded funds (ETFs) for ETH.

Data from digital asset manager CoinShares revealed that while capital inflows into digital assets have resumed following record-high outflows, Bitcoin continues to attract the lion's share of these inflows. However, CoinShares analysts noted a slowdown in ETF activity, with daily trading turnover falling to $5.4 billion in the week ended March 30. This marks a 36% decrease from the peak seen three weeks prior.

The decline in ETF activity suggests that the initial excitement surrounding the approval of Bitcoin ETFs is gradually fading after sparking a substantial rally over the past two months. The approval of spot Bitcoin ETFs has been a primary catalyst for the token's surge in 2024, propelling it to record highs above $73,000 in March.

As the financial markets grapple with uncertainty over the path of interest rates and other macroeconomic factors, Bitcoin and the broader cryptocurrency ecosystem face continued volatility and a cautious outlook.